By Mustafa Bilgic · Updated 2026-06-26 · Non-attorney operator
When a claim resolves, you may be offered a choice: take a lump sum today, or a structured settlement that pays you guaranteed amounts over time (often tax-free in physical-injury cases). Salespeople on both sides argue their option is "worth more." This calculator settles it on an apples-to-apples basis — comparing the present value of the payment stream against the lump sum, with the option to credit the structure's tax-free advantage.
The calculator discounts each future structured payment back to today's dollars using your discount rate, then compares that present value to the lump sum:
| Structured settlement | Lump sum | |
|---|---|---|
| Liquidity | Low — locked into a schedule | High — full control immediately |
| Taxes (physical injury) | Payments generally tax-free, including growth | Principal tax-free, but investment gains taxed |
| Overspending risk | Protected — "spendthrift" benefit | Exposed — many lump sums are gone in a few years |
| Investment upside | Fixed return set at funding | Potential to earn more (or lose) by investing |
| Big future expenses | Hard to access — may force a costly sale | Available for a home, business, or care |
| Inflation | Fixed unless a cost-of-living rider is purchased | You manage inflation yourself |
Offer A: $250,000 lump sum. Offer B: $18,000/year for 20 years (tax-free), discounted at a 4.0% safe after-tax rate:
On a pure present-value basis the lump sum edges ahead here — but once you credit the structure's tax-free guarantee (the $250k lump sum's growth would be taxed), the structure often pulls even or ahead, and it removes mismanagement risk. This is why the decision is rarely just the bigger number.
Many people choose a hybrid: part lump sum for immediate needs, part structured for guaranteed long-term income. That is frequently the most defensible plan. See our deep-dive on the real math behind structured settlements.
Yes, often decisively. If a lump sum would be invested in a taxable account, the structure's tax-free growth means you need a higher pre-tax return on the lump sum just to match it. The calculator's tax option approximates this advantage.
Not freely. Selling future payments on the secondary market requires court approval and is done at a steep discount, so a structure should be treated as a long-term commitment, not a reversible one.
Typically a highly rated life-insurance company funds an annuity, with the obligation assigned to a qualified assignment company under IRC § 130. The annuity issuer's credit strength is part of evaluating the offer.
Sources: IRC § 104(a)(2) and § 130 (qualified structured settlements and assignments); IRS Publication 4345; state structured-settlement protection acts governing secondary-market sales; standard present-value methodology. Tax and legal treatment depend on facts and jurisdiction — verify with a licensed attorney and tax professional.
Built and last reviewed by Mustafa Bilgic (non-attorney operator) on 2026-06-26.
Structured Settlement Real Math → · Net Settlement Calculator → · Lost Earning Capacity →